Medicaid: The Primary Payer
Public funding dominates long-term care (LTC) financing in the United States, with Medicaid being the largest single payer. This program, funded by both federal and state governments, serves low-income individuals who require long-term care after exhausting their personal funds. Medicaid covers various LTC services in both nursing homes and community settings, though eligibility varies by state. Unlike Medicare, Medicaid provides extensive LTC coverage once personal resources are depleted.
How Medicaid Supports Long-Term Care
Medicaid offers several ways to fund long-term care:
- Nursing Home Medicaid: Covers all costs, including room and board, for eligible seniors needing this level of care. Most states require beneficiaries to contribute their income towards costs.
- Home and Community-Based Services (HCBS) Waivers: Allows individuals to receive care at home or in assisted living. These waivers promote independence but are not an entitlement and may have waitlists.
- Aged, Blind, and Disabled (ABD) Medicaid: Provides healthcare and some community-based long-term care for those with medical needs.
Medicare's Limited Role
Many people incorrectly believe Medicare covers long-term care. However, Medicare coverage for LTC is very limited:
- Short-Term Skilled Care: It covers a maximum of 100 days of skilled nursing facility care per benefit period, following a hospital stay, for rehabilitation.
- No Custodial Care Coverage: Medicare does not cover custodial care, which assists with daily activities like bathing and dressing. Most long-term care needs fall under this category.
Private and Out-of-Pocket Expenses
Before becoming eligible for Medicaid, individuals often use private funds, such as savings and investments, to pay for care. This process is known as "spending down".
Common Private Funding Sources:
- Out-of-Pocket Spending: Covers deductibles, co-payments, and services not covered by other sources, making up a significant portion of expenses.
- Long-Term Care Insurance: Private policies that cover LTC services. However, they are expensive, and few people have them.
- Personal/Family Contributions: Includes unpaid care from family and financial support.
- Veterans Benefits: The VA provides some LTC coverage for eligible veterans.
Comparison of Major Long-Term Care Payers
| Payer Source | Percentage of Total Spending (approx. 2023) | Key Coverage Details | Limitations and Considerations |
|---|---|---|---|
| Medicaid | ~45.6% | Covers nursing home, home, and community-based services for low-income individuals | Eligibility is means-tested (based on income and assets); requires spending down resources; HCBS waivers can have waitlists |
| Medicare | ~18.0% | Limited to short-term, medically necessary care in a skilled nursing facility (up to 100 days); covers hospice | Does not cover long-term custodial care; minimal coverage for assisted living or home care |
| Out-of-Pocket | ~14.4% | Used for private pay in facilities, home care, and to meet Medicaid spend-down requirements | Can quickly deplete lifetime savings; high costs can be catastrophic for household finances |
| Private Insurance | ~8.7% | Covers services based on policy specifics; includes private LTC insurance and health insurance with limited LTC benefits | Expensive premiums; coverage can be limited; few adults are covered |
| Other Public/Private | ~13.3% | Varies by program (e.g., Veterans Health Administration, tribal programs, philanthropy) | Smaller portion of overall funding; eligibility and coverage depend on specific programs |
Conclusion: Planning for Future Care
Understanding which source pays for most long-term care provided to older adults in the United States is crucial for planning. Medicaid funds the majority of paid care, typically after individuals have spent their savings. Other sources like private insurance cover a smaller portion. Early financial planning is essential due to the high costs involved. For more information, visit the National Council on Aging to learn more about funding for long-term care..
